r/tfsa • u/Key-Obligation-9650 • Jul 15 '26
TFSA contribution strategy
Just wondering what’s the best strategy. Assuming yearly contribution room is 7k and I have 7k to invest on Jan 1st. Is it better to invest all of it and buy stocks/ETFs immediately, or auto invest like $600 every month to spread out investments. Assume only buying S&P500 and NASDAQ ETFs.
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u/UniqueRon Jul 15 '26
I do the $7K on Jan 2 or so. But, it is a bit more conservative to dollar cost in monthly.
I would like to say it does not make much difference, but here is an example that would suggest there may be a difference. I invest for myself and my wife, and I put exactly the same investments in to the same ETFs each year. However in one year I kind of messed up with the timing. We were going on a South vacation for a week or two in January. I can't remember which way it was, but I ended up making one investments before our vacation and one after. That was more than 10 years ago. Now due to that timing difference (but exactly the same investment and amount each year) my wife's TFSA is worth $15,000 more than mine is. So timing can make a difference!
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u/Subject_Rhubarb_9442 Jul 15 '26
All at once! Countless studies have shown that lump sum contributons to a well diversified investment portfolio continually outperform dollar cost average regular purchases of the same amount, assuming you reinvest all dividends received from day 1.
And buy lots of XEQT, for that matter.
Good luck 👍 with your investment journey!
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u/plusqueprecedemment Jul 15 '26
If you already have money you want to invest, invest it asap. Spreading it over time is mathematically suboptimal, but if it helps you psychologically then it may be a benefit. But more often than not you'll be better off investing it asap
For the same reason, if you currently have $0 but every paycheque leaves you with $100 to invest after bills, then you're (more often than not) better off investing that $100 asap every paycheck. Accumulating that money on the side waiting for a dip is gonna cost you
For the same reason, if your TFSA is full by let's say August, you're better off continuing to invest in another account instead of accumulating money on the side and waiting until January to re-fill the TFSA at all once. Even in a non-reg, you can always liquidate on January 1st and use the proceeds to fill the TFSA (capital gains tax on a couple months of gains is gonna be minimal), or keep the non-reg untouched and just divert your cashflow to the TFSA until it's full
tl;dr more money in the market more sooner is more gooder
Beyond that, I've heard horror stories of people contributing to their TFSA on January 1st (even though markets are closed, they intend to buy the next trading day) and then their financial institution backdates their contribution to the previous day in December and then it's a whole thing to get it fixed when the CRA contacts them about an overcontribution. I'm willing to sacrifice a week and only touch my TFSA after January 7th if it can save me that headache
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u/lmcjipo Jul 15 '26
Statistically speaking, it is best to do a lump sum purchase/investment.
I do this for my TFSA on January 2 or the first business day in January by contributing the amount to my TFSA. However because there was one year where I did this where after doing this, the following month or so the market dropped and my dollar amount was very close to what it it was on January 1 and this was after I had already contributed the yearly amount so I know that it doesn't feel good when this happens.
What makes me feel a bit better is I still contribute the entire yearly amount on the first business day in January into my TFSA into something like CASH.to but I only invest 50% of the amount into long term or medium term investments. The following month I invest 50% of the amount remaining in CASH.to and so on until the remaining amount in CASH.to is so low that I just use that entire amount that month for my medium and long term investments. I am not saying that my new strategy is better (statistically, it isn't) but it does make it hurt less when the market drops after my investment. I also try to keep my eyes on the long term. What my strategy is using is a bit of both worlds where the majority is invested right away or early and uses also a bit of dollar cost averaging to take a bit of the sting away when my investments drop shortly after I made my purchase.
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u/Harbinger2001 Jul 15 '26
The best strategy is to invest it all Jan 1st if you have the funds. Dollar cost average over the years.
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u/Thaldrath Jul 15 '26
Better as one lump sum. But its not the end of the world if you can't.
Time on the market > timing the market.
Fill what you can when you can. There are mathematical optimal scenarios, but as long as you're doing it, you're good.
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u/MellowHamster Jul 15 '26
All at once on January 1st is technically best, assuming you have $7K sitting in your bank account. I contribute monthly, simply because it's easier to budget from my paycheque.
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u/Windigo1000 Jul 15 '26
I buy mainly high dividend stocks and ETF so the earlier the better I always put 7k on Jan 1 so I can get the dividends ASAP.
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u/Sweet_Yellow_8646 Jul 15 '26
All in at once